Resources

Title Insurance Information

Why do you need title insurance?
To protect possibly the most important investment you'll ever make - the investment in real estate.

A lender goes to great lengths to minimize the risk of lending money for the purchase of real estate. First, credit is checked as an indication of the borrower's ability to repay the loan.

Then, the lender seeks assurance that the quality of the title to the property to be acquired and which will be pledged as security for the loan is satisfactory. The lender does this by obtaining a loan policy of title insurance.

The loan policy does not protect the borrower.
The loan policy protects the lender against loss due to unknown title defects. It also protects the lender's interest from certain matters which may exist, but may not be known at the time of the sale.

But, this policy only protects the lender's interest. It does not protect the borrower. That is why a real estate purchaser needs an owner's policy, which can be issued at the same time as the loan policy, usually for a nominal one-time fee.

What is the danger of loss?
If the lender has title insurance protection and the owner does not, what possible danger of loss exists?

As an example, assume real estate was purchased for $100,000. A down payment of $20,000 is made, and a lender holds an $80,000 mortgage lien, or beneficial interest. The lender acquires title insurance protecting the lender's interest up to $80,000. But the purchaser's down payment of $20,000 is not covered.

What if some matter arises affecting the past ownership of the property? The title insurance company would defend and protect the interest of the lender. The purchaser, however, would have to assume the financial burden of his or her own legal defense. If the defense is not successful, the result could be a total loss of title.

The title insurance company pays the lender's loss and is entitled to take an assignment of the borrower's debt. The purchaser loses the down payment, other equity in the property that may have accumulated, and the property. And the balance on the note is still due!

How can there be title defect if the title has been searched and a loan policy issued?
Title insurance is issued after a careful examination of copies of the public records. But even the most thorough search cannot absolutely assure that no title hazards are present, despite the knowledge and experience of professional title examiners. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search.

What title insurance protects against.
Here are just a few of the most common hidden risks that can cause loss of title or create an encumbrance on title:

False impersonation of the true owner of the property
Forged deeds, releases or wills
Undisclosed or missing heirs
Instruments executed under invalid or expired power of attorney
Mistakes in recording legal documents
Misinterpretations of wills
Deeds by persons of unsound mind
Deeds by minors
Deeds by persons supposedly single, but in fact married
Liens for unpaid estate, inheritance, income or gift taxes
Fraud

What protection does title insurance provide against defects and hidden risks?
Title insurance will pay for defending against any lawsuit attacking the title as insured, and will either clear up title problems or pay the insured's losses. For a one-time premium, an owner's title insurance policy remains in effect as long as the insured, or the insured's heirs, retain an interest in the property, or have any obligations under a warranty in any conveyance of it. Owner's title insurance, issued simultaneously with a loan policy, is the best title insurance value a property owner can get.


				Title Insurance Glossary
			Title Insurance Glossary Abstract of Title - A condensed history or summary of all transactions affecting a particular tract of land. Adjustable Rate Mortgages - Mortgages with an interest rate that may change up or down depending on an indicator. These are usually based something like the current Treasury bill rate. Affidavit - A sworn statement in writing. All-Inclusive Title insurance - This means that most title insurance charges are included in one price. Amortize - To reduce a debt by means of regular periodic payments which include amounts applicable to both principal and interest. APR - Annual percentage rate. On some mortgages the APR is higher than your actual mortgage rate. Assumption - A mortgage that allows a new owner to take over payments. The original borrower remains liable on the mortgage note. Deed - A written document by which the ownership of land is transfered from one person to another. Deed of Trust - Instrument used to secure a loan on real estate. Like a mortgage, generally used in the South. The major difference is in how forclosures are handled. Forclosures are much faster with a Deed of Trust than with a Mortgage. Deposit or Earnest Money - Advance payment of part of the purchase price to bind a contract for property. Due-on-Sale Clause - A provision in a mortgage or deed of trust which requires the loan to be paid in full if a property is sold or transfered. Equity - The interest or value which an owner has in real estate over and above the debts against it. Escrow - (1) A procedure whereby a disinterested third party handles legal documents and funds on behalf of a seller and buyer. (2) Money that is kept by the mortgage company to ensure that taxes can be paid in full when due. This is paid up front on settlement sheet lines 1001 - 1006 and is added to the mortgage payment monthly over the prinicial and interest figure. FNMA (Fannie-Mae) - The Federal National Mortgage Association, a federally sponsored private corporation which provides a secondary market for housing mortgages. Fixed Rate Mortgages - Mortgages with a fixed interest rate. You payment for principal and interest will not change for the life of the loan. Your monthly payment may change if taxes or insurance rates change. FHA - The Federal Housing Administration. An agency of the federal government which insures private loans for financing of new and existing housing and for home repairs under government approved programs. FHLMC (Freddie Mac) - Federal Home Loan Mortgage Corporation. An affiliate of the Federal Home Loan Bank, which creates a secondary market in conventional residential loan and FHA and VA loans by purchasing mortgages from members of the Federal Reserve System and the Federal Home Loan Bank System. Foreclosure - Legal process by which a mortgagor of real property is deprived of his interest in that property due to failure to comply with terms and conditions of the mortgage. Grantee - A person who acquires an interest in land by deed, grant or other written instrument. Grantor - A person who, by a written instrument, transfers to another interest in land. Hazard insurance - The homeowner's insurance policy. Heir - One who might inherit or succeed to an interest in lands under the rules of law applicable where an individual dies without leaving a will. In personam - Directed at specific persons rather than against property or generally for all people. In rem - Pertaining to property or people in general. Interest only payments - A mortgage where only the interest is paid on a monthly basis. This means that the buyer gets no equity. This is only used on some purchase money mortgages where the buyer is responsible for paying the seller the entire amount of the second mortgage at some time in the future. Instrument - A written document. Loan origination fees - Money required by the lender to be paid to start the work of approving a mortgage. Judgment - A decree of a court. Lien - A hold, a claim or charge allowed a creditor upon the lands of a debtor. Mortgage Note - An instrument used to encumber land as security for a debt. This document gives the mortgage company "in rem" jurisdiction over the mortgagor. Mortgagee - A designation for the mortgage lender on lands. Mortgagor - A designation for the mortgage borrower on lands. MIP - Mortgage insurance protection Note - A written promise to pay a certain amount of money, at a certain time, or in a certain number of installments. It usually provides for payment of interest and its payment is at times secured by a mortgage. The mortgage note document gives the mortgage company "in rem" jurisdiction over the mortgagor. The promisory note document gives the mortgage company "in personam" jurisdiction over the mortgagor. P.O.C. - Paid outside of closing. Sometimes the lender requests this money before settlement. If you pay any charges before settlement they should be written on the settlement sheet. They are written on the proper line outside of your column. They should also be marked P.O.C. Point - a percentage point. Equal to one percent of the loan amount. Power of Attorney - An instrument authorizing another to act on one's behalf as his agent or attorney. PMI - Private mortgage insurance. PMM - Purchase money mortgage. A mortgage given by the seller simultaneously with the purchase of real estate to secure the unpaid balance of the purchase price. Pro-Rate - To allocate between seller and buyer their proportionate share of an obligation paid or due. Promisory NoteA promise to pay. The promisory note document gives the mortgage company "in personam" jurisdiction over the mortgagor. Real Property - Land and that which is affixed to it. Reissue Rate - A reduced rate of title insurance premium applicable in cases where the owner of the land has been previously insured in an owner's policy by the insurer within a certain time. Second Mortgage - A mortgage, the lien of which is subordinate to that of another mortgage. Survey - The process of measuring land to determine its size, location and physical description and the resulting drawing or map. Tax Service Fee - A fee paid to the mortgage company to verify that they actually pay the real estate taxes. Title - The evidence or right a person has to the ownership and possession of land. Title Insurance - Insurance against loss or damage resulting in defects or failure of title to a particular parcel of real property. Title Insurance Binder or Commitment - A report issued by a title insurance company binding or committing the title insurance company to issue the form of policy designated in the commitment or binder upon compliance with and satisfaction of requirements set forth in the commitment or binder. Title Search - An examination of public records and court decisions to disclose the current facts regarding ownership of real estate. Transfer taxes - Money paid to the county and or state when property is sold. VA - The Veterans Administration. They insure mortgages. Will - A written document properly witnessed, providing for the distribution of property owned by the deceased.

Title Insurance Glossary